Australia has a three-tier economy with Western Australia, the Northern Territory and New South Wales outperforming the rest of the country, according to the quarterly Commsec State of the States report.

The report was released amid warnings from the Melbourne Economic Forum on Monday that Australia faced declining living standards unless it radically boosted its productivity.

In the Commsec report, the states were assessed using a number of key indicators including retail spending, equipment investment, employment, construction work, population growth, housing finance, dwelling starts, wages, inflation and home prices.

South Australia and Tasmania are the national underperformers, with the other states and the ACT in the middle.

Among the top tier, Western Australia ‘‘remains the best-performing economy in the nation, holding its position due to strength in home purchase and construction,’’ according to Commsec.

The state is ranked first for retail trade and housing finance, second for economic growth and construction work, and third for business investment, population growth and dwelling starts.

The Northern Territory is the second strongest economy, leading the way on economic growth, business investment, employment and construction work.

New South Wales remains the third strongest economy, underpinned by solid population growth and home building.

Among the middle tier economies, ‘‘there is little to separate Queensland, Victoria and the ACT’’, according to Commsec.

Queensland the second strongest on business investment but seventh on population growth, Victoria is the second-ranked economy for population growth and housing finance and the ACT has the second strongest economy for employment and dwelling starts.

‘‘There is a sizeable gap in the rankings to South Australia and Tasmania,’’ the report noted, with the two states performing badly on the key indicators.

South Australia is sixth to eighth on the key indicators, although it is fifth on construction work and population growth;

Tasmania is the worst-performing economy in the nation, coming last on four indicators – economic growth, construction work, population growth and dwelling starts.

Each of the key indicators was ranked as a percentage change in the March 2014 quarter on a decade average.

Meanwhile, detailed modelling published on Monday by the Melbourne Economic Forum – a newly created group of top economists and public policy specialists – has predicted stark outcomes for Australia unless there are further economic reforms.

The Forum said that the end of the resources investment boom and falling terms of trade could mean unemployment will hit 6.6 per cent in just over a year, pushing an extra 250,000 people into joblessness and stripping $1200 from per-capita income by 2020. As well, incomes were likely to fall until at least 2020 as the mining boom receded and export prices fell, sending gross national income per capita down by about 0.3 per cent a year over the next five years.

To prevent this, Australia would need an ABS-measured productivity growth rate of 0.7 per cent per annum just to maintain living standards, and 2 per cent to keep living standards growing at their average for the past decade, said the Forum.

To prevent a rise in unemployment, real average earnings would need to shrink by 0.89 per cent a year, and the dollar would need to fall by an extra 20 per cent – equivalent to around US75¢ – to help the economy make its adjustment to the post-boom era.

Ross Garnaut and Leslie Martin, economics professors at the University of Melbourne, and James Giesecke, director of Victoria University’s Centre for Policy Studies, conducted the modelling.

‘‘Do we have a problem that requires budget adjustment, income restraint and new reform efforts to lift productivity? Or is the Australian ‘she’ll be right’ approach to economic policy in the early 21st century good enough,” the pair write.

The Forum will host its first gathering on Monday to discuss Australia’s macro-economic prospects. It will hear presentations by Professors Garnaut; Treasury’s head of macro-economics, David Gruen; former Liberal leader John Hewson; and former Labor trade minister Craig Emerson.

National News

Federal government

budget cuts spur

childcare crisis

nationwide

CHILDCARE providers are warning they will close their doors unless a federal government funding cut from the Budget is reinstated.

Family Day Care Australia said the Community Support Program was vital for many family daycare centres — ensuring educators were properly recruited, trained and operating in line with national standards.

It said 72 per cent of services were braced for funding cuts when the changes came into effect in July 2015.

The Abbott government has tightened eligibility criteria for the CSP, which it says blew out by $200 million in three years under Labor.

Some parents are quitting work because the cost of childcare is simply to high.

It is now targeting it to services in regional, remote and disadvantaged communities.

One of the largest childcare services, All Areas Family Day Care in Sydney, said it could have no choice but to close down if the eligibility crackdown went ahead.

“We are facing a very real threat from these funding cuts,” co-director Amany Mikhail said.

And Family Day Care Australia chief executive Carla Northam said it was a national problem: “Every family daycare stakeholder, from children and parents to educators and service staff, will pay the price of the changes to CSP funding.”

But Assistant Minister for Education Sussan Ley said parents who used family daycare received about 30 per cent more assistance under the childcare benefit, and the majority of CSP funding went to centres in competitive metropolitan areas.

“(To) continue on unchanged would’ve been counterproductive and ultimately unsustainable,” she said.

It’s a catch 22 for many families with some mothers going back to work early to cover rising household bills.

Sydney provider Heather Town, who has a family daycare centre under the umbrella of All Areas Family Day Care and specialises in taking children with special needs, said she hoped the Abbott government would reconsider the changes. “I love my job, I love helping children with special needs,” she said. Meanwhile, Opposition Leader Bill Shorten will write to childcare centres across the country to urge them to fight changes to childcare payments, including the move to freeze indexation on the means-­tested childcare benefit.

Senior education department officials have previously confirmed the move, which will save the government $230 million over the next four years, will have an impact on half a million families.

Call for tax breaks on daycare fees

Early childhood educator Heather Town at her All Areas Family Day Care with kids she looks after (from right) James, 3, Ethan, 20 months and Abby, 3. Picture: Toby Zerna

BY IAN WALKER

SKY-HIGH childcare costs are preventing mothers ­returning to the workforce and are damaging their careers.

Women’s groups want government and employers to subsidise daycare so women aren’t forced to stay home to look after their own children.

A National Centre for ­Social and Economic Modelling report has shown women working full time on $16.37 an hour only keep $4.55 of it after childcare costs.

Australian Businesswomen’s Network spokeswoman Cheryl Hayman said: “It’s sad women who aren’t paid highly are forced out of the workforce. You would have to be really committed to work for $5 an hour.”

Early Childhood Educator Heather Town (left) understands the pressures families are facing when it comes to daycare costs.

A survey of 14,000 women by the Heat Group found 42 per cent would work 20 hours or more a week if childcare was cheaper, while 30 per cent said they would like fees to be tax deductible.

UK research has shown women taking more than two years out of the workforce lose 18 per cent of their future earning power, jumping to 38 per cent for three years out of the workforce.

Sydney mother Caitlyn Sutterby reluctantly returned to work recently as the ­income of her husband Robert couldn’t cover their bills.

About $160 of the $180 she earns each week goes to childcare for her two sons.